Finland-Transport Equipment

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Shipbuilding, which had led the development of heavy
industry, continuing to be the most important branch of
the
transport sector, and it determined the sector's health.
The land
transportation branch, however, led by exports of railroad
locomotives and rolling stock to the Soviet Union,
provided a
valuable supplement to shipbuilding. Finland first began
to
produce automobiles in 1969, and it had developed a full
range of
vehicles.

By the late 1980s, Finland's shipbuilding industry
ranked
fifteenth worldwide. The country boasted eight major
shipyards,
which employed about 14,000 highly skilled workers. Unlike
many
other countries (including nearby Norway), Finland had
avoided
large investments in petroleum tankers, a choice that
proved to
be a blessing when the world tanker market slumped in the
late
1970s. Instead, Finland had specialized in high-priced
vessels
such as icebreakers, luxury liners, car ferries, ocean
exploration vessels, and container ships. Starting in the
1970s,
shipbuilders also had branched out into offshore
oil-drilling
platforms and equipment. Finnish icebreakers were
world-famous--
the country had produced about 60 percent of all
icebreakers in
service by the late 1980s. Finland also specialized in
vessels
designed to operate in arctic conditions. Such projects
were well
suited to Finnish expertise, and they yielded
higher-value-added
products that compensated for high input costs.

Shipyards exported up to 80 percent of their
production,
which made them heavily dependent on world market
developments.
The shipbuilding industry had survived the difficult years
following the 1973 and the 1979 oil shocks without
subsidies from
the government (except for occasional favorable financial
packages); these years had seen a wave of mergers and
large-scale
investments that had improved competitiveness. Above all,
the
industry owed its success to continued orders from the
Soviet
Union in a period when demand lagged in Western markets.
Finland
was thus the one European country in which the number of
shipyard
workers had increased after 1975. During the same period,
the
Finns built two new shipyards for oceangoing vessels,
established
a heavy engineering works for oil-drilling rigs, and
modernized
older yards.

By the late 1980s, however, it appeared that
shipbuilding was
entering a crisis. The decline in the price of oil in the
middle
of the decade caused a reduction in Soviet purchasing
power,
limiting new orders for ships
(see Regional Economic Integration
, this ch.). Moreover, Soviet buyers, who had long preferred
Finnish ships, had started to place orders with other
countries,
including East European firms that enjoyed lower labor
costs. At
the same time, certain Finnish specialties, such as
icebreakers,
were attracting competition from more advanced
shipbuilding
countries such as Japan.

The crisis in shipbuilding led to a decline in
employment and
to further restructuring. In July 1986, two of Finland's
four
major shipbuilding companies, Wartsila and the Valmet
Group,
merged their shipbuilding divisions and planned to
eliminate
about 40 percent of their 10,000 jobs. Another several
thousand
workers were out of work, and the increased competition
from the
new firm threatened the two remaining firms, Rauma-Repola
and
Hollming. Indeed, competition had already undermined an
arrangement under which each firm specialized in a
particular
field: Wartsila in icebreakers and luxury liners, the
Valmet
Group in cargo ships, Rauma-Repola in offshore oil
equipment, and
Hollming in high-technology research vessels. As the
crisis
continued, industry analysts began to question whether the
industry could survive without government bailouts.